Preliminary Results

OMG PLC 06 December 2005 OMG plc ('OMG' or 'the Company') Preliminary results for the year ended 30 September 2005 OMG, the leading supplier of motion capture and visual geometry systems for life sciences, entertainment and engineering applications, announced today its preliminary results for the year ended 30 September 2005. Highlights: * Turnover increased 30% to £14.2m (2004: £10.9m) * Operating profit before goodwill amortisation and exceptional items increased by 193% to £923,000 (2004: £315,000) * Earnings per share increased by 65% to 1.27p (2004: 0.77p) * Cash balances increased during the year by £0.3m to £4.4m * Strong recovery in the second half in the important North American market with annual revenue growth of 37% excluding the acquisition of Peak Performance Technologies Inc's business ('Peak') * Strong performance in the Far East led by the Japanese market with 83% revenue growth * Positive contribution from Peak, acquired in February, with revenues of £1.3m and operating profit before goodwill amortisation and exceptional items of £185,000 * Major order for premium MX camera system in excess of $3m * New development agreement signed by subsidiary 2d3 with QinetiQ to provide key technology for recovering 3D information from airborne video imagery * Investment commences in radical diversification project Nick Bolton, Chief Executive, commented: 'For the Group to be reporting these very satisfactory results after such a slow start to the year is a tribute to the inspiration and hard work of the entire OMG team, and provides a strong foundation on which to build the coming year of growth and diversification.' For further information please contact: Nick Bolton, Chief Executive, nick.bolton@omg3d.com Peter Wharton, Finance Director, peter.wharton@omg3d.com Tel: 01865 261800 Tim Thompson / Frances Adigwe Buchanan Communications Tel: 020 7466 5000 About OMG OMG plc (LSE: OMG) is the global leader in the three-dimensional capture and analysis of movement, providing tools and services for life sciences, entertainment and engineering applications. Based in Oxford UK, California USA and Colorado USA, OMG has customers in over 35 countries and is listed on AIM, a market operated by the London Stock Exchange. The group trades through a number of operating subsidiaries in the name of Vicon Peak, 2d3 and House of Moves in the UK and USA, and through a network of distributors in other major countries. Vicon Peak provides professionals with the latest tools to capture accurately three-dimensional human motion for research, medicine, sport, engineering, game development, broadcast and film. 2d3 produces innovative visual geometry software deriving 3D data from moving images. House of Moves is the world's most experienced motion capture service studio, producing high quality motion capture data for entertainment production companies. For more information about OMG, or its subsidiaries, visit www.omg3d.com, www.viconpeak.com, www.2d3.com or www.moves.com. CHAIRMAN AND CHIEF EXECUTIVE STATEMENT The year ended 30 September 2005 has been one of change. Change in terms of revenue performance between the two halves of the year - £9.4m second half versus £4.8m first half. Change in terms of product - a dozen new product releases and upgrades across the Group. Change in terms of management - Julian Morris passing on the role of Chief Executive to Nick Bolton. We believe OMG is a business with an exciting present and enticing future. The present is a group of companies in strong or dominant global market positions, with distributed geographical and sector risk. The future is one of realisable opportunities in both core and diversified business based on a deep pool of technology. Financial Summary Group turnover, including acquisitions, rose 30% to £14.2m (2004: £10.9m). Turnover excluding the acquisition of Peak Performance Technologies Inc.'s business ('Peak'), grew 19% to £12.9m. Gross profits improved from 56% of turnover to 60% due to higher volume and lower manufacturing costs of the new MX motion capture system. However, the improvement in gross margin was partially offset by the sale of earlier product lines at lower margins. Operating profit before amortisation of goodwill and exceptional items increased by 193% to £923,000 (2004: £315,000) and after goodwill amortisation and exceptional items, increased by 107% to £593,000 (2004: £286,000). The exceptional items amounting to £216,000 comprise one-off costs relating to the cost of rationalising distribution channels following the acquisition of Peak and the cost of changes within senior management. Profit before tax improved by 51% to £690,000 (2004: £457,000). Earnings per share increased by 65% to 1.27p (2004: 0.77p) The Group's strong cash position further improved during the year to £4.4m (2004: £4.1m). Business Review Second Half Turnaround Group full-year profit before tax of £690,000 contrasts dramatically with the reported first half loss of £549,000. Stand-alone second half profit before tax was a healthy 13% of equivalent revenues. The turnaround was achieved by a major improvement in revenues and tight control and selective reduction of costs. Sales management has been completely reorganised with more direct and regular reporting of UK and US sales teams. Product lines, services, procedures and infrastructure are being consolidated across all operations within the Group. Manufacturing costs are being further reduced by higher volume production of standard products. Global Revenue Growth Revenue growth for the year was strong across all markets, with the exception of UK which, as previously reported, enjoyed exceptional revenues in the previous year. For the first time in the Group's history, North America delivered over half (58%) of global revenues. Including eight months of sales from Peak, the Group's second US acquisition, revenues from North America increased by 62%. Excluding Peak, revenues from North America rose 37%. In the second half year, several large individual orders - one for over $3m for a very large installation of the new MX40 motion capture system - were won in the highly competitive US entertainment market. Far Eastern and Continental European markets also grew well with revenues up by 83% and 16% respectively. In particular, Japanese revenues were up 109%, with strong growth across all market sectors. Acquisition of Peak & other Corporate Investment The Group's core business was significantly strengthened by the acquisition of the business of Peak based in Denver, Colorado in February 2005. Peak is a specialist in motion capture for sports science and human and animal motion research using video image recording. Within 45 days of completion, the two existing companies' product ranges were combined and re-branded under the name Vicon Peak. Within 60 days, the Peak Motus motion capture software was re-engineered to use Vicon's MX cameras. Within 90 days, the first Vicon orders were taken through a former Peak sales channel and global distribution channels were rationalised, allowing access to all markets. Peak's product range for its well-established sports and animal science markets in North America is now considerably extended. In Europe, the response of the academic sports science market to the merger of two well-respected companies and the availability of a combined optical and video motion capture system has been particularly strong. As a result, since joining OMG, Peak's sales have increased while its costs are reduced, giving the business new focus as a profitable operation. During the year, the Group has taken a 12% stake in Munich-based start-up Contemplas Gmbh. Contemplas produces software for simple 2D and 3D motion capture and analysis based on video (DV) recording. Their aim is to bring the technology into consumer-driven markets such as running-shoe selection and fitness assessment. Marketing Led, Engineering Driven Global sales channels for the Group's core products, built around motion capture and camera tracking, are well established. Applications cover an extraordinary range from the production of feature films and computer games to military training; from medical research and treatment to engineering ergonomics; and from sports performance to the study of the neural control of the gait of millipedes. During the year the Group has increased its marketing resource, bringing systematic analysis and planning to the process of prioritising and specifying the Group's product development. Industry Awards In February 2005, Vicon Motion Systems was awarded a Scientific & Technical Academy Award, a 'Technical Oscar', by the Academy of Motion Picture Arts & Sciences for contributions made through optical motion capture to the film industry. The Company's other leading product for the entertainment industry, 2d3's boujou automatic camera tracker, was used in 4 out the 7 films nominated for the Oscar for Best Visual Effects, including the winning film Lord of the Rings. New Product Introductions The Vicon Peak MX product range has been enhanced by the introduction of MX Bridge and Reference Video. MX Bridge allows many older models of Vicon camera to be used alongside the new MX cameras. Customers wishing to upgrade their systems can now do so gradually, without having to discard existing cameras. As well as the integration of MX cameras into the Peak Motus system, Vicon software has also been enhanced to allow simultaneous video capture from a range of DV and digital machine vision cameras with a range of resolutions and frame rates. Vicon Peak motion capture systems are frequently used in applications where accurate 3-dimensional tracking of targets, ranging from surgical and medical devices to performing actors and animals, is required in 'real time'. During the year, the development of a combination of new tracking algorithms and software engineering for parallel processing on multi-processor computers has dramatically increased real-time performance. The possibility of a director viewing a live multi-character animation as it is performed removes one of the remaining separators between motion capture and traditional film making. 2d3's original automatic camera tracker, boujou, used mainly in the movie industry has been considerably enhanced and upgraded with the release during the year of versions 3.0 and 3.1. A simpler version of boujou, aimed at video and educational markets, is now sold under the name bullet. Radical Diversifications During the year, the Group tasked a team, comprising the past and present Chief Executives and a full-time Business Development manager, to evaluate opportunities for radical diversification of the Group's business. The main criteria were: * Market potential well above the combined markets of the Group's current products * Expectation of taking and holding market leadership and dominance * Gain leverage from existing in-house or accessible new technologies From several dozen potential business areas, a short list of opportunities has emerged, winning the unanimous support of the Board. One opportunity in a defence application of 2d3's 'structure-from-motion' IP has moved forward with the recently-announced development agreement with QinetiQ. Another, based on IP from both Vicon and 2d3, concerns management and maintenance of key national infrastructure. For reasons of commercial sensitivity it is not possible to give more details of these developments at present. Dividend Policy As in previous years, the Directors are not declaring a dividend, although the dividend policy will be kept under review. Comment & Outlook Despite the marked contrast between the first and second halves, the Group's overall financial performance in 2004/5 was very satisfactory, with excellent revenue growth, market diversification, good control of costs and cash, and increasingly healthy profits. The Group's plan is to continue this pattern of profitable growth in two ways. Firstly, through business execution in our core markets, where market activity appears well able to support this plan. Secondly, through a structured business diversification programme. Although at a very early stage, the new opportunities for diversification look exciting. Currently the Company has adequate internal resources to progress these diversifications and has already committed an initial investment of £0.2m so far this year. Details of progress with diversifications will be made available in due course. Trading in the current year is making a strong start and we will review progress at the Annual General Meeting. Anthony Simonds-Gooding, Chairman Nick Bolton, Chief Executive 6 December 2005 CONSOLIDATED PROFIT AND LOSS ACCOUNT for the year ended 30 SEPTEMBER 2005 Notes 2005 2005 2005 2004 Continuing Continuing Total Continuing Operations Operations - operations Acquisitions £'000 £'000 £'000 £'000 Turnover 3 12,930 1,283 14,213 10,895 Cost of sales (5,173) (447) (5,620) (4,818) --------- ------ ------- ------- Gross profit 7,757 836 8,593 6,077 Sales, support and marketing costs (2,977) (327) (3,304) (2,360) Research and development (1,542) (65) (1,607) (1,399) Administrative expenses (2,756) (333) (3,089) (2,146) Grant income - - - 114 -------- -------- -------- -------- Operating profit before goodwill amortisation and exceptional items 738 185 923 315 Goodwill amortisation (86) (28) (114) (29) Exceptional items 4 (170) (46) (216) - -------- -------- -------- -------- Operating profit 482 111 593 286 Interest receivable and similar income 97 171 -------- -------- Profit on ordinary activities before taxation 690 457 Tax credit / (charge) on profit on ordinary activities 5 46 (51) -------- ------- Retained profit for the financial year 736 406 ======== ======== Basic earningsper ordinary share 6 1.27p 0.77p Diluted earnings per ordinary share 6 1.22p 0.71p There is no material difference between the retained profit on ordinary activities before taxation and the retained profit for the financial year stated above and their historical cost equivalents. STATEMENT OF GROUP TOTAL RECOGNISED GAINS AND LOSSES FOR THE YEAR ENDED 30 SEPTEMBER 2005 2005 2004 £'000 £'000 Retained profit for the financial year 736 406 Exchange differences on retranslation of opening net assets of overseas subsidiaries 9 (7) -------- -------- Total recognised gains and losses for the year 745 399 ======== ======== CONSOLIDATED AND COMPANY BALANCE SHEETS AT 30 SEPTEMBER 2005 Group Group Company Company 2005 2004 2005 2004 £'000 £'000 £'000 £'000 Fixed assets Intangible assets 1,353 891 132 56 Tangible assets 970 863 169 195 Investments 69 - 978 645 ----- ----- ----- ------ 2,392 1,754 1,279 896 Current assets Stocks 1,739 1,712 - - Debtors 3,637 3,239 2,366 2,794 Cash at bank and short term deposits 4,371 4,096 3,525 3,152 ----- ----- ----- ----- 9,747 9,047 5,891 5,946 Creditors: amounts falling due within one year (2,902) (2,558) (279) (240) ------- ------- ------ ------ Net current assets 6,845 6,489 5,612 5,706 ------ ------ ------ ------ Total assets less current liabilities 9,237 8,243 6,891 6,602 ====== ====== ====== ====== Creditors : amounts falling due after more than one year - (82) - - ------ ------ ------ ------ Net Assets 9,237 8,161 6,891 6,602 ====== ====== ====== ====== Capital and reserves Share capital 147 138 147 138 Shares to be issued 241 241 - - Share premium account 5,692 5,370 5,692 5,370 Profit and loss account 3,157 2,412 1,052 1,094 ----- ----- ----- ----- Total equity shareholders' funds 9,237 8,161 6,891 6,602 ===== ===== ===== ===== CONSOLIDATED CASH FLOW STATEMENT For the year ended 30 September 2005 2005 2004 £'000 £'000 Net cash inflow from operating activities 1,015 236 Returns on investments and servicing of finance Interest received 97 169 Taxation 8 164 Capital expenditure and financial investment ------------------- Purchase of tangible fixed assets (897) (780) Disposal of tangible fixed assets 282 43 ------------------- (615) (737) Acquisitions ------------------- Purchase of subsidiary undertaking (342) (629) Net cash acquired with new subsidiary 111 - Other investment acquired (69) - ------------------- (300) (629) ------- ------- Net cash inflow / (outflow) before financing 205 (797) Financing Issue of ordinary share capital 61 78 ------- ------- Increase / (decrease) in cash 266 (719) ======= ======= NOTES TO THE PRELIMINARY ANNOUNCEMENT For the year ended 30 September 2005 1. Basis of Preparation The financial information in this preliminary announcement is unaudited and has been prepared on the going concern basis, under the historical cost convention and applicable accounting standards in the United Kingdom and is consistent with the policies set out in the Group's statutory accounts for the year ended 30 September 2004. 2. Basis of Consolidation The consolidated financial statements consolidate those of the Company and all of its subsidiary undertakings drawn up to 30 September 2005. Acquisitions of subsidiaries are dealt with by the acquisition method of accounting from the date of acquisition. 3. Turnover and segmental analysis The directors consider there to be only one class of business, that of motion capture. An analysis of turnover destination by geographical market is given below: 2005 2004 £'000 £'000 United Kingdom 673 2,217 Continental Europe 2,021 1,746 North America 8,245 5,082 Far East 3,089 1,691 Other 185 159 ------ ------ 14,213 10,895 ====== ====== An analysis of turnover by origin is given below: 2005 2004 £'000 £'000 United Kingdom 6,166 5,965 North America 8,047 4,930 -------- ------- 14,213 10,895 ======== ======= An analysis of operating profit and net assets by geographical origin is given below: Operating profit Net Assets 2005 2004 2005 2004 £'000 £'000 £'000 £'000 United Kingdom 494 177 8,767 8,147 North America 99 109 470 14 --------- --------- --------- --------- 593 286 9,237 8,161 ========= ========= ========= ========= All turnover, operating profit and net assets attributable to acquisitions is from North America. 4. Exceptional items Exceptional costs of £216,000 (2004: nil) comprise the cost of reorganising distribution channels and management changes relating to the acquisition of Peak Performance Technologies Inc.'s business, and other senior management changes within the group. 5. Tax on profit on ordinary activities The tax (credit) / charge is based on the profit for the year and represents: 2005 2004 £'000 £'000 United Kingdom corporation tax at 30% (2004: 30%) 8 - Overseas taxation - 51 Adjustments in respect of prior year (54) - -------- -------- (46) 51 ======== ======== At 30 September 2005, the group had an undiscounted deferred tax asset of £283,000 (2004: £255,000), which has not been recognised. The asset comprises accelerated capital allowances of £41,000 (2004: £124,000), and the accumulated unrelieved tax losses of £904,000 (2004: £725,000) available to subsidiary undertakings of the Group, to offset against future taxable trading profits of the same trade. Unrelieved tax losses in respect of prior years were increased by £775,000, principally due to the submission of claims for R&D tax credits. Tax losses amounting to £596,000 have been utilised during the year. Due to the risks and uncertainty over the subsidiaries' timing and extent of future trading profits, the deferred tax asset has not been recognised. The tax assessed for the year is lower than the standard rate of corporation tax in the UK of 30% (2004: 30%). The differences are explained as follows: 2005 2004 £'000 £'000 Profit on ordinary activities before tax 690 457 ===== ===== Profit on ordinary activities multiplied by the standard rate of corporation tax in the UK of 30% (2004: 30%) 207 137 Effect of: Expenses not deductible for tax purposes 62 10 Depreciation in excess of capital allowances (5) (53) Utilisation of losses (179) - Tax effect of prior year adjustment - (68) Adjustments to tax charge in respect of prior year (54) - Higher rates on overseas taxation - 15 Unrecognised deferred tax on losses - 50 Research and development tax credit (77) (40) -------- -------- Current (credit) /charge for the year (46) 51 ======== ======== 6. Earnings per Share 2005 2004 weighted weighted average average number of Per share number of Per share Earnings shares amount Earnings shares amount £'000 pence £'000 pence Basic earnings per share Earnings attributable to ordinary shareholders 736 58,065,827 1.27 406 52,887,870 0.77 Dilutive effect of securities Options - 2,265,211 (0.05) - 4,222,384 (0.06) Diluted earnings -------- ---------- -------- -------- ---------- -------- per Share 736 60,331,038 1.22 406 57,110,254 0.71 ======== ========== ======== ======== ========== ======== 7. Reconciliation of Movements in Shareholders' Funds 2005 2004 £'000 £'000 Retained profit for the financial year 736 406 Issue of shares 331 78 Contingent shares to be issued - 241 Currency movements 9 (7) ----- ------ Net movements in shareholders' funds 1,076 718 Shareholders' funds at 1 October 2004 8,161 7,443 ----- ------ Shareholders' funds at 30 September 2005 9,237 8,161 ===== ====== 8. Reconciliation of Operating Profit to Net Cash Inflow from Operating Activities 2005 2004 £'000 £'000 Operating profit 593 286 Depreciation & amortisation 692 268 Loss / (profit) on disposal of fixed assets 14 (4) Decrease / (increase) in stock 68 (347) Increase in debtors (296) (837) (Decrease) / increase in creditors (56) 870 -------- -------- Net cash inflow from operating activities 1,015 236 ======== ======== 9. Acquisition On 9 February 2005 the Group completed the acquisition of the trade and assets of Peak Performance Technologies Inc for a total consideration of £593,000. This included a contingent cash consideration element of up to £53,000 subject to certain performance conditions. The total goodwill arising upon acquisition was £461,000, which is being written off over 10 years. The fair value of the business net assets acquired was as follows: Provional Book value Adjustment fair value £'000 £'000 £'000 Fixed Assets 40 - 40 Intangible Assets - 108 108 Stock 89 - 89 Trade debtors 46 - 46 Prepayments and accrued income 9 - 9 Cash 111 - 111 Trade creditors (14) - (14) Accruals and deferred income (197) (15) (212) -------- -------- -------- Net Business Assets Acquired 84 93 177 -------- -------- -------- Consideration: Cash 270 Share consideration 270 Contingent cash consideration 53 -------- Total provisional consideration 593 Costs of acquisition 45 -------- Provisional purchase consideration and costs of acquisition 638 -------- Provisional goodwill arising 461 ======== The contingent cash consideration is dependent upon a final review of the fair value of the net assets acquired to be performed after 30 September 2005. The maximum amount payable under this arrangement will be £53,000 although £27,000 has already been paid following a fair value review of certain of the assets. This review has not yet been completed. The directors have made use of all the information available at the year end in order to estimate the likely value of the contingent cash consideration. The fair value of the intellectual property acquired has been assessed by the Company and valued at £108,000. In the financial year to 30 September 2004, Peak Performance Technologies Inc. had revenues of £1.8 million and made a profit before tax of £25,000. In the period from 1 October 2004 to 8 February 2005, Peak Performance Technologies Inc had revenues of £425,000 and made a loss before taxation of £34,000. 10. Publication and non-statutory accounts The preliminary results for the year ended 30 September 2005 are unaudited. The financial information set out in this preliminary announcement does not constitute statutory accounts as defined in Section 240 of the Companies Act 1985 for the years ended 30 September 2005 or 30 September 2004. The financial information for the year ended 30 September 2004 is derived from the Annual Report for that year which was delivered to the Registrar of Companies. The auditors, Pricewaterhouse Coopers LLP., reported on those accounts: their report was unqualified and did not contain a statement under either section 237 (2) or 237 (3) of the Companies Act 1985. 11. Copies of Announcement Copies of this announcement will be available from the Company's registered office at 14 Minns Business Park, West Way, Oxford OX2 0JB. 6 December 2005 This information is provided by RNS The company news service from the London Stock Exchange

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